In April 2016, HMRC commissioned Ipsos MORI to conduct research into the characteristics of small companies, those with 0 to 4 employees, including details such as business composition, size and sector, company income, expenditure and assets, and particularly how they derive their income and work with clients. This research has just been published in January 2018.
Interestingly as extracting funds from a company and the salary/dividend option seems to continue to worry government, the conclusion notes that for most companies surveyed
‘the main drivers of retained earnings are business and personal factors – tax is reported as a relatively minor consideration. In theory, retaining money within a business rather than transferring it to a personal account, may have tax advantages. However, this was not widely raised as an explicit reason for retaining earnings either in the survey or the qualitative research.’
The research included a random probability telephone survey of 1,000 businesses and follow-up qualitative interviews with 30 businesses who had taken part in the survey.
Business size and composition
73% of businesses had one or two employees – 40% had one and 33% had two. A further 20% had three or four employees. Fewer than one in ten (8%) had no employees at all. Two in five of all businesses categorised themselves as one-person operations (41%) – indicating they were the sole person working in the business with no other directors or shareholders involved.
Other key facts which emerged were: